Gold rose slightly, continuing yesterday's increase, which was facilitated by the weakening of the US dollar. Investors are also preparing for the release of key data on the US labor market.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.19% to 100.92. Given that gold is often priced and traded in USD, it typically has an inverse relationship with the dollar. Since the beginning of the week, gold prices have risen by 0.74%, while DXY has fallen by 0.81%. Gold has hit record highs this year, rising about 22% so far, with speculators increasing their total net long position on COMEX by 17% from July to 917 tons by the end of August, the highest level since February 2020. Meanwhile, yesterday the World Gold Council (WGC) said that global physically backed gold exchange traded funds (ETFs) saw the fourth consecutive month of inflows in August.
The key event on Friday will be the publication of the nonfarm payrolls report for August (at 12:30 GMT), which may affect the size of the Fed's rate cut at the September meeting. Experts said that gold prices are likely to continue their rise if today's report shows signs of weakness in the labor market, though the market could experience bouts of volatility. According to forecasts, the nonfarm payrolls rose by 160 thousand in August after an increase of 114 thousand in July, the unemployment rate fell to 4.2% from 4.3%, and annual wage growth accelerated to 3.7% from 3.6%. According to the CME FedWatch Tool, markets see a 43% probability of a 0.5% rate cut in September (up from 30% the week before), and a 57% probability of a 0.25% rate cut (down from 70% the week before), with a 1% rate cut expected by the end of the year. Bullion, a non-yielding asset, is more appealing in a low interest rate environment.